Note here ... that although I can not change the work item's status in Eclipse/FastTrack ... I can however change it via the PolarionALM web interface.

I also noticed in the search "Search" view (FT) ... the status field has the status as 'assigned' (when I mouse over) ... instead of "Assigned" ... (it's as if and cant figure out the canonical name of the status from the option tag, so it it's showing the status id instead).

Can anyone see what/if I have done something wrong, ... or is this a bug in FT?

Have you downloaded the workflow-internal.xml file to your local tracker folder? This is the file which makes the workflow work, the files you've written are just a convenient abstraction which the server processes into workflow-internal.xml for you.